Other People’s Money 1

Famous personal financial advisors – Suze Orman and Jim Cramer come most easily to mind – keep giving people the same bad advice: if you have ten or more years to retirement, invest heavily in equities. The implication being, over any given 10 year period, you can’t lose.

Well, here’s the reality check.

Friday’s close on the Dow was 7,776.18.

On March 30, 1999, the Dow closed at 9,874.41.

That’s a 21.2% loss for that 10-year period.

Granted, there are 10-year periods in which you would have done fine in equities. If you had invested everything you owned in stocks on the day Bill Clinton took office, you’d be wondering what all the recession fuss was about, too. (To wit: see my post “Whatever happened to the ‘Barack-Olypse‘.”)

But there are abundant examples of 10-year periods in which you would have lost a bundle in the market. Investing in the equivalent of indexes or index ETFs anytime between 1965 and 1973, for example, you would more than likely have had a 10-year loss. And investing in equities at any point in the last decade, as we see above, was treacherous.

Unless you were timing the market – which we are repeatedly advised not to do – or picking individual stocks AND timing the market – which we are repeatedly told is too dangerous for the average investor – you would have been much, much better off over the past decade with CDs and T-bills. Hell, you would have been better off with an ING Savings Account!